Rural US ripe for investment, Vilsack says

Rural America take note: the U.S. Department of Agriculture intends to bring a touch of Wall Street to Main Street.

The agency's newest funding model, the subject of a national conference that begins Wednesday in Washington, D.C., promotes private investment as the way to spur economic growth in rural communities. That's according to Tom Vilsack, U.S. Secretary of Agriculture, who spoke with the Statesman Journal in a recent interview. The growth goes beyond agriculture, and targets infrastructure and other key industries as well.

For everyone involved, the proposal couldn't come at a better time — rural communities need the attention, investors need new opportunities in a rebounding economy, and the USDA needs their dollar to go further in the face of ongoing budget cuts.

USDA interest outside of agriculture is far from new. For years, the agency and its state offices have prioritized small communities as a whole, supporting projects that range from business loans, to housing, to major utilities such as water and telecommunications.

Since 2009, the agency has put up $2.75 billion for the purpose of rural development, funding that doesn't include support farm loans or subsidies. It's not enough, according to the agency.

"The investment is significant, but there is more opportunity than there are federal dollars," Vilsack said. "This conference is a new way of doing business; it expands beyond our traditional role of loans and guarantees, and we're doing it in multiple economies."

The two-day Rural Opportunity Investment Conference is an attempt to fund rural projects through the archetype of urban: major investment firms. Rural business and government leaders from across the country will meet with representatives of Manhattan-based Blackrock Inc., for example, the largest asset manager in the world.

The conference isn't the only way the USDA is channeling private interest. In May, the agency unveiled a $150 million equity fund that unites traditional farm lenders with Advantage Capital Partners, another investment firm. More such public-private funds are in the works, according to the USDA.

Vilsack said this new method of funding rural development, in addition to standard loans and grants, will go a long way toward replacing economic activity displaced by streamlined farming operations.

"We have become so efficient with farming that we don't need as many people to do what used to be done by millions of people — it's now done by thousands of people," Vilsack said. "What we need to do is complement that production agriculture economy with companion economies."

Another reason to push private investment is the impact of the federal sequester. Vilsack diminished their effect last week, but they nevertheless hamper the agency's ability to distribute loans and grants. Rural communities in Oregon that rely on USDA loans may very well see fewer available in coming years, as the agency's discretionary funding has fallen gradually since 2010 and will face additional cuts through 2021.

"We are going to see a reduction in wastewater, business and industry, and utility loan programs," Vilsack said during a House Agriculture Committee Hearing last year. "There is a lot of work being done, but we are not going to be able to do as much of it because we are not going to have the financial resources we had."

Vilsack told the Statesman Journal that Oregon is one of more proactive states when it comes to fostering public-private partnerships outside the city limits.

"Oregon is a step or two ahead of a lot of the states," he said. "It has in place an understanding of the need for the attention to rural areas."

One of the strongest examples of that is the West Coast Infrastructure Exchange, a network of West Coast states and British Colombia, with headquarters in Portland, which is aimed at solving dire infrastructure needs.

Executive Director Chris Taylor is attending the USDA conference this week, and agrees private investment is an important avenue for meeting rural infrastructure needs. He said the key is coupling the needs of several communities together into a single project to make it more lucrative for investors.

"Getting equity in the deal requires a certain scale that most smaller rural projects can't achieve," Taylor said. "But a lot of these needs are similar — there are a lot of communities that needs a new sewage treatment plant."

"We've got to figure out a way to put together vehicles that are attractive. Suffice to say, there is capital out there that is interested in making these investments."

Taylor said while Oregon does not maintain toll roads, there is a variety of infrastructure that generates revenue through operation, and other infrastructure needs — city halls and other public buildings, for example — can gain private interest if the government offers compensation for the construction and maintenance of the building.

"The bottom line is that we can't solve the problem using the status quo approach," Taylor said. "We can't just borrow through issuing new bonds all the infrastructure that we need, that we've created such a backlog for."

Vilsack and Taylor met with several local investors and government officials in Salem last week as a preview of the national conference this week. The meeting was closed to the press.